Generally, products such as automobiles have been financed through a personal loan system, whereby the purchaser makes a down payment, takes title to the product and pays the loan balance in monthly payments which amortize the full amount of the loan. More recently, leasing arrangements have been introduced whereby the lessee makes monthly rental payments, returning the product to the lessor at the end of a predetermined term specified in the lease. Title to the product remains in the lessor. It is sometime specified in the lease that the lessee may at his option purchase the product for a stated value when the lease expires. The conditions of the lease may also include charges, e.g. a charge for abnormal mileage or wear and tear for lease of an automobile.
U.S. Pat. No. 4,736,294 discloses data processing methods and apparatus for managing vehicle financing. The data processing system provides information to assist in granting a loan, and determining at the time of making the loan a residual value of the vehicle at a predetermined option date.
Considering vehicle leases, at the signing of the lease, the lessee chooses a vehicle and states how many years he intends to keep it and the approximate mileage he intends to cover. Generally speaking, the lease duration is normally between 1 to 4 years while the number of miles varies from 20,000 to 60,000. Depending upon the vehicle and lease duration and mileage, the lessor determines monthly rental payments at the time of making the lease by estimating the resale value factor at the end of the lease, also referred to as the residual value factor, and costs due to the benefit margin, insurance and maintenance. Without taking into account the margin of the lessor, insurance, maintenance, etc., for sake of clarity, the sum of monthly rental payments corresponds to the difference between the sticker price, i.e. the purchasing price of the automobile as proposed by the manufacturer, and the resale price. If the resale price at the end of the lease is less than the estimation done at the time of making the lease, monthly rental payments have been underestimated and, as a consequence, the lessor loses money. Reciprocally, if the resale price at the end of the lease is more than the estimation done at the time of making the lease, monthly rental payments are overestimated, and thus the leases are not attractive. During the lease, the lessee may modify it to adapt its duration or mileage if the lessor agrees. In such a case, the residual value has to be reevaluated to adjust monthly rental payments accordingly.
In parallel with product loan, rental or purchase, maintenance agreements are often proposed. Such contracts are particularly suitable for leases since they reduce the lessee's care and provide a known and constant quality of service that increase residual value factor estimation accuracy. Thus, by adjusting the product value at the end of the lease, the lessor can purpose attractive leases without increasing commercial risks. By making a regular payment, e.g. a monthly payment, the lessee can effectively budget for the servicing and repair of the leased product since the lessor takes preventive and repair maintenance to his charge, e.g. overhauling of motor cars as advised by manufacturers.
Maintenance costs depend both on the product characteristics and maintenance agreement conditions, e.g. lease duration and mileage for vehicle leases. However, due to the general complexity of the products that are subjects of the maintenance agreements and the duration of the maintenance agreement, e.g. several years, the maintenance costs are difficult to model, and thus are generally evaluated approximately and experimentally by specialists.